Price differences between U.S. light and heavy crude oil grades have been widening, pricing data showed, as refiners around the world have been snapping up less-dense crude grades for more gasoline production.
As summer begins, sky-high demand and profits from motor fuels production has encouraged global refiners to buy lighter barrels. Since Russia’s invasion of Ukraine, more Russian Urals crude has been moving to Asia as more U.S. light-sweet heads to Europe.
Those changes, combined with ultra high prices for natural gas used in refining, have favored, easier-to-process lighter grades. Prices for U.S. natural gas have more than doubled this year.
Gasoline-friendly light sweet WTI Midland priced at East Houston, called MEH, has averaged a $1.40/bbl premium to U.S. WTI, compared with a 96-cent premium in the year-ago period, as exports to Europe climbed.
The spread between Midland and heavy Western Canadian Select (WCS), priced in Houston, widened to about $12/bbl by late May from around $8 at the start of April, data from consultancy RBN Energy showed.
WCS prices also were affected by maintenance at Suncor Energy’s Syncrude operations, which coverts oil sands to exportable grades, analysts said.
Differentials between Light Louisiana Sweet and medium sour Mars crude, both priced in Louisiana, also widened by more than $2 to $6.8 in the same period, according to Refinitiv Eikon data.
Mars has been trading at heavy discounts to match cut-rate prices for competing Russian Urals grades in export markets as China and India, among the world’s top oil consumers, have been snapping up discounted Russian barrels.
Mars also has faced competition in the U.S. from similar quality sour barrels released from the Strategic Petroleum Reserve.
“I would expect heavy/light differentials to correct a little bit and narrow somewhat, though remain wider than they were in early April,” RBN Energy analyst Robert Auers said.
Recommended Reading
APA Closes $4.5B Callon Deal, Deepening Permian Roots
2024-04-01 - About two-thirds of Apache’s daily production will come from the Permian Basin after APA Corp. completed its $4.5 billion takeout of Callon Petroleum.
Elk Range Royalties Makes Entry in Appalachia with Three-state Deal
2024-03-28 - NGP-backed Elk Range Royalties signed its first deal for mineral and royalty interests in Appalachia, including locations in Pennsylvania, Ohio and West Virginia.
Dallas Fed Energy Survey: Permian Basin Breakeven Costs Moving Up
2024-03-28 - Breakeven costs in America’s hottest oil play continue to rise, but crude producers are still making money, according to the first-quarter Dallas Fed Energy Survey. The situation is more dire for natural gas producers.
Marketed: EnCore Permian Holdings 17 Asset Packages
2024-03-05 - EnCore Permian Holdings LP has retained EnergyNet for the sale of 17 asset packages available on EnergyNet's platform.
Vital Energy's ‘Wildly Successful’ 2023 ‘Small Ball’ M&A Now in ‘Moneyball’ Mode
2024-02-23 - The operator added big runs in $1.6 billion of 2023 deals. Now Vital is looking to make more out of its hits via geology and geophysics, including steals “for free.” Still, it might pick up big consolidators’ cast-offs.